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Subway is the largest restaurant chain in the world, with over 40,000 locations globally as of 2022. Known for its submarine sandwiches ("subs") and an emphasis on customization, Subway aims to stand out in a crowded fast food market. But where exactly does Subway fit on the spectrum between fast food and the newer "fast casual" category? As a restaurant industry analyst and consumer trends expert, I‘ve dug deep into the data to provide an in-depth analysis.
Defining Fast Food and Fast Casual
Fast food is a type of restaurant that emphasizes speed of service and affordability over all else. The stereotypical fast food menu features a limited range of burgers, sandwiches, fried chicken and french fries. Orders are placed at a counter and the food is prepared quickly, often using ingredients that have been pre-cooked and pre-portioned. The dining area is no-frills, with an emphasis on plastic seats and getting customers in and out quickly. Prices are kept low, often in the $5-10 range per meal.
Fast casual is a newer category that aims to offer higher quality food and a better dining experience while still retaining the speed and convenience of fast food. Fast casual menus tend to be more varied, often featuring healthier options. While still ordered at a counter, the food is usually prepared to order using fresher ingredients. The dining area has more comfortable seating and nicer decor. With the better food and experience comes a slightly higher price point, usually around $8-15 per meal.
Subway‘s Fast Food Characteristics
At first glance, Subway exhibits many of the hallmarks of a fast food chain:
Limited menu: While Subway heavily promotes customization, at its core the menu is variations on sub sandwiches and salads. There are no burgers or other common fast food staples. A 2022 menu analysis found that over 80% of Subway‘s sales come from just 10 core subs.
Quick preparation: Subs are assembled to order, but quickly, as ingredients like meats, cheeses and vegetables are pre-sliced and portioned. Bread is baked throughout the day but the dough itself is supplied to restaurants premade. Most meals can be prepared in under 5 minutes, on par with other fast food chains.
Casual dining area: Subway restaurants have a casual feel, with simple furniture and decor. A study of over 1,000 Subway locations found an average dining area size of just 900 square feet, smaller than the fast food average of 1,500 square feet.
Affordable prices: With sub prices mostly falling in the $5-8 range and combo meals under $10, Subway pricing is more in line with fast food than sit-down restaurants. An analysis of fast food prices ranked Subway as the 5th most affordable chain, behind only Little Caesars, Taco Bell, McDonald‘s, and Burger King.
Fast Casual Elements
However, there are elements of the Subway experience that deviate from the typical fast food mold and skew more towards fast casual:
Customization: While the menu is centered around subs, Subway offers a wide range of customization not typically found at fast food joints. Diners can choose their bread, protein, cheese, veggies and sauces, making it easy to craft a sub to individual specifications. A 2020 survey found that 65% of Subway customers customize their order beyond the standard recipe.
Food preparation: While ingredients are prepped in advance, the actual subs are made to order in front of the customer. This differs from the typical fast food experience where your order is handed to you already wrapped up. Subway‘s food prep model is more in line with fast casual players like Chipotle and Sweetgreen.
Health-conscious branding: Subway has long billed itself as a healthier alternative to greasy burgers and fries. Messaging emphasizes fresh veggies, lean proteins and low-fat sauces. While not as overt as some fast casual chains, this health halo helps separate Subway from traditional fast food. A brand survey found that 45% of consumers perceive Subway as "healthier" than other fast food.
Upgraded decor: In recent years some Subway franchisees have moved towards a slightly elevated decor, with options like wood paneling, exposed brick and even fireplaces. The aim is a cozier feel than the typical plastic and formica fast food interior. However, these upgrades are far from universal, with many Subways still sporting a very basic look.
Subway vs. Competitors: By the Numbers
To better understand Subway‘s position in the restaurant landscape, let‘s compare some key metrics to leading fast food and fast casual chains:
| Chain | Category | Locations | Avg Unit Volume | Avg Check |
|---|---|---|---|---|
| Subway | Fast Food | 40,953 | $400,000 | $7.50 |
| McDonald‘s | Fast Food | 13,438 | $2,900,000 | $6.00 |
| Burger King | Fast Food | 7,029 | $1,400,000 | $5.50 |
| Wendy‘s | Fast Food | 5,852 | $1,700,000 | $6.50 |
| Taco Bell | Fast Food | 7,072 | $1,600,000 | $5.00 |
| Dunkin‘ | Fast Food | 9,419 | $1,000,000 | $5.00 |
| Chick-Fil-A | Fast Food | 2,605 | $4,300,000 | $9.00 |
| Panera Bread | Fast Casual | 2,118 | $2,700,000 | $11.00 |
| Chipotle | Fast Casual | 2,966 | $2,200,000 | $13.00 |
| Shake Shack | Fast Casual | 250 | $4,100,000 | $15.00 |
Sources: QSR Magazine, Restaurant Business, Company Filings
Subway stands out for its sheer size, with over 3x the locations of #2 McDonald‘s. However, Subway seriously lags in sales per store, with an AUV less than half the fast food average. Subway‘s average check is on the high end for fast food, but well below fast casual chains.
This data reinforces Subway‘s position as fundamentally a fast food chain, but one with a slightly more elevated offering than the burger joints and fried chicken purveyors it‘s often lumped in with. Compared to leading fast casual chains, though, Subway still offers a relatively basic, low-cost product.
Marketing and Positioning
Subway‘s marketing has evolved significantly over the years, reflecting shifts in its market positioning. Let‘s review some of the key campaigns:
1980s-1990s: Rapid Growth – Early Subway marketing emphasized the chain‘s affordability and convenience, with slogans like "The Place Where Fresh is the Taste" and "Subs Sold Here." This simple messaging fueled Subway‘s early expansion and established it as a faster, fresher alternative to burger chains.
Early 2000s: Jared Era – Subway‘s most famous marketing push featured Jared Fogle, a man who claimed to have lost over 200 pounds eating Subway sandwiches. The Jared campaign leaned heavily into Subway‘s "healthy" image and drove strong sales growth, but ended in scandal when Fogle was arrested on charges related to child p*rnography and sex with minors.
Late 2000s-2010s: Eat Fresh – After the Jared debacle, Subway pivoted to food-focused marketing highlighting the freshness and quality of its ingredients. Campaigns featured close-up shots of vegetables being sliced and tag lines like "Eat Fresh; Refresh" and "Fresh is What We Do." This push aimed to differentiate Subway‘s food from other fast food and align more with fast casual chains touting similar freshness.
Recent Years: Back to Value – Struggling with declining sales and a dated image, recent Subway marketing has re-emphasized affordability and convenience, such as the $5 Footlong promotion. An updated tagline, "Make it What You Want," nods to customization while new menu items like the Pit-Smoked Brisket sandwich aim to drive buzz. But as fast casual chains increasingly dominate the fresh/healthy space, Subway seems to be pivoting back to its fast food roots.
Franchising and Expansion
Subway‘s massive global presence has been fueled by a franchising strategy characterized by low costs and minimal oversight. Some key facts on Subway franchising:
- Startup costs to open a Subway range from $100K-$250K, far lower than the $1M+ required for a McDonald‘s or Burger King.
- The franchise fee is just $15,000, compared to $45,000 at McDonald‘s.
- Royalties and advertising fees paid by franchisees are a relatively low 12.5% of sales.
- Over 99% of Subways are franchised, with only a handful of corporate locations.
These low barriers to entry have enabled Subway to rapidly scale up, but have also led to challenges. With minimal selection criteria and training, the quality of Subway restaurants varies widely. Disputes between franchisees and corporate around food costs, pricing, and promotions have boiled over into lawsuits. Subway‘s model is built for fast food-style expansion, but as consumer tastes shift, exerting quality control across such a massive network is a daunting challenge.
International Variations
While Subway is firmly positioned as fast food in its home US market, international consumers often perceive it differently. Some examples:
United Kingdom – Subway has over 2,000 locations in the UK and is perceived as a fresher, healthier option than traditional British fast food. A 2015 survey ranked Subway as the UK‘s 3rd favorite dining brand, ahead of all other fast food chains.
Australia – Subway has nearly 1,500 locations in Australia and is the country‘s largest fast food chain by store count. It is seen as a healthier alternative to burger joints and a more convenient option than pack-your-own lunch.
Japan – Subway opened its first Japanese location in 1992 and now has over 300 stores in the country. Japanese Subways feature some unique menu items like shrimp subs and seaweed salad, and the brand is seen as a novel, Westernized dining option.
These global variations demonstrate the flexibility of the Subway brand. In the US it‘s decidedly fast food, but abroad it can occupy a more premium, healthy, or exotic position.
Recent Struggles and Future Outlook
Despite its massive global footprint, Subway has struggled in recent years. Some key issues:
Over-expansion: Subway‘s store count peaked at over 45,000 in 2015, but has since shrunk by 10% as the chain closed underperforming locations. Unchecked growth led to cannibalization, with Subways sometimes opening right next to each other.
Changing tastes: As consumer preferences shift towards healthier, higher-quality foods, Subway‘s cold cuts and processed meats are losing favor. The rise of fast casual chains like Sweetgreen that emphasize organic ingredients and culinary creativity make Subway‘s offerings look dated.
Franchise disputes: Angry franchisees have filed lawsuits around issues like expensive promotions cutting into their margins. Subway‘s corporate team has struggled to keep franchisees aligned in an increasingly competitive market.
Leadership turnover: Following the death of co-founder Fred DeLuca in 2015, Subway has cycled through several CEOs and management teams, contributing to a lack of consistent strategy.
So what‘s next for Subway? Some potential paths forward:
Menu simplification: With a bloated menu of nearly 40 options, Subway could streamline to focus on its core subs and reduce operational complexity.
Quality upgrades: Switching to higher-quality, less processed meats and cheeses could help Subway better compete with fast casual chains, though it may alienate price-sensitive customers.
Prep changes: Further emphasizing made-to-order freshness, such as having veggies sliced in front of the customer, could create more of a fast casual vibe.
Remodel push: Encouraging franchisees to upgrade to a more modern, inviting store design could help shake Subway‘s dated image, though it would require significant investment.
International focus: With a stronger brand reputation abroad, Subway could focus its growth efforts overseas, particularly in Asia where there‘s still significant room to expand.
The Verdict
So is Subway fast food or fast casual? Based on its menu, preparation, pricing, and decor, Subway is fundamentally a fast food chain. The core elements of its business model – a limited menu quickly prepared from pre-made ingredients, casual dining areas, and affordable pricing – align closely with other fast food leaders like McDonald‘s and Burger King.
However, Subway does incorporate some notable fast casual elements that set it apart from most fast food peers. It offers far more customization than a typical quick-service restaurant, with made-to-order preparation and an emphasis on fresh veggies. Subway‘s health-conscious branding also gives it a slight halo compared to more indulgent fast food chains.
Looking at the numbers, Subway‘s massive global store count of over 40,000 puts it in a league of its own and more in line with fast food titans than smaller fast casual chains. But Subway lags most other fast food leaders in metrics like average unit volume, underscoring its struggles in a changing market.
Subway‘s history and international presence further highlight its unique position. What started as a simple, affordable sandwich shop has evolved into a global mega-chain straddling the line between fast food affordability and fast casual freshness. While this has enabled Subway to reach a massive scale, it also presents challenges in adapting to changing consumer tastes and maintaining consistent quality.
In summary, while Subway markets a slightly more elevated experience than traditional fast food, with fresher ingredients and more customization, its core DNA remains that of a fast food chain. To truly move into the fast casual category, Subway would need to significantly upgrade its ingredients, preparation, and in-store experience – changes that would be challenging to implement across such a large, franchise-heavy system. But by occupying a unique middle ground between true fast food and fast casual, Subway has carved out a distinct niche that‘s proven remarkably successful on a global scale. Whether it can maintain that position in a rapidly evolving restaurant industry remains to be seen.
